Category Archives: Credit Scores

What Frederick MD Consumers Should Know About the Equifax Data Breach

In my recent interview with Credit Counselor Blair Warner, of Upgrade My Credit, I learned some valuable things about the Equifax Data breach that took place over the summer of 2017. Here is the recorded interview: What You Need to Know About the Equifax Data Breach

Know the difference between a credit freeze and a credit lock. (Blair explains below)

If you find that you are having trouble because of the Equifax data breach, maybe you suspect your information has been compromised, or for any other reason, we highly recommend Blair Warner with Upgrade My Credit. He can be reached at 817-886-0302 ext. 3, or via email: blair@upgrademycredit.com

UPDATE

Since the interview:

Equifax withdrew their CreditLock product due to all the backlash and are now offer free Identity Theft Protection and Credit Monitoring. www.equifax.com

Blair: I’ve been doing this for 10 years now. Before the mortgage crash and credit crisis in 2007, I was a mortgage loan officer. I transitioned into credit counseling at that time. I’m glad to be able to talk about this subject with you.

K: I actually I feel like I’m talking to you as a consumer today. Tell us about the Equifax Data breach, I know it’s been a couple of months and it might be on the back burner of the news, but I’m still interested in what, if anything, we should know and do about it.

B: That’s a good way to put it; the news cycle is that way…they focus on something for a week and then move on to the next thing. It’s a pretty big deal for the American people it’s a bigger deal than they’re making it. They’re trying to keep it hush-hush and what disturbs people the most, other than the fact that their data was breached, is that it was breached for over a month, or almost six weeks like six weeks before they made it public. This means that the hackers could have done anything with your data during that time. It’s long gone by now probably and it will never be recovered and they will probably never trace who did it. and it was just

People have hacked banks, they have hacked government programs, a lot organizations have had their data hacked. What makes this data breach different is that it is a broader problem due to the sheer number of people that were affected. Over one hundred and forty million American’s data was breached. If you think about it, there are three hundred and thirty or forty million people in the United States, and then a certain proportion of those are kids and a certain proportion of those are elderly…I’m just guessing but could conceivably be just about every active adult between 20 and 70 years old right now.

The reason that it affects everybody, even if you’ve never gotten credit, is because the credit bureaus are not just in the reporting business, they are in the data collecting business. Just like the government, they know your date of birth, they know your social security number, your driver’s license, your address and a lot more. The reason is that they sell your data to lenders and companies so that they can solicit your business. That’s why you get may get solicitations in the mail where you’re pre-approved for lines of credit. They know you’re pre-approved because they bought your information from one of the three credit bureaus.

Equifax claims that nothing was breached in a way that would hurt your credit, but they said that two months ago. As someone in the credit industry I’ve already seen people’s credit reports affected. People are finding things showing up on their credit report that don’t belong to them. Some may find changes that affect them positively, but other people can be affected negatively.

One of the things Equifax did was spend millions if not a billion dollars on their own in-house security. It took them 30 days to do that. After they finished, they said “we’ve done a test and now our system is now secure. Don’t worry people in America.” The problem is that the information is already out there.

K: It’s like the horses left the barn and the barn burned down, but guess what, we shut the barn doors!

B: I hate to say this but they think consumers are stupid, but that’s why we’re trying to get informed today. So after they said their system was secure, it won’t happen again, then they immediately decided to monetize and make money on this catastrophe. They built a new webpage and they’re offering a new product called “Credit Lock” for $19.95 a month. With this service nobody can access your credit or try to pull your credit report. The truth is, it’s too late.

The problem: One, they’re making money on the catastrophe. Two, they spent a massive amount of money, multi-million dollars on security tests to make sure everything’s secure… so if everything’s secure, why do they need you to spend $20 a month for security? It kind of feels fishy to me.

K: So what can you do?

B:Here’s the good news:you don’t have to buy Equifax’s credit lock. There is a way to get any what’s called a “credit freeze” on your credit report. It is essentially the same thing as a credit lock but, of course, Equifax couldn’t call it a credit freeze. But it’s the exact same thing. A credit freeze is free because it’s mandated in the Fair Credit Reporting Act. Consumers should have the right to freeze their credit at their discretion and so it’s covered by law. They also mandated and said that consumers get one free credit report a year, so you can know if there are errors on your credit report.

I’ve been telling my clients about free credit freezes for a while and it’s a good thing to do now. You only really need to freeze Equifax, don’t worry about freezing TransUnion and Experian. The only caveat is, if someone is going to need to use credit in the next six months, like if they want to buy a house, then they don’t want to put a credit freeze in place.

I’m Tired of Solicitations!

There’s another step you can take. You can opt out of allowing credit companies to sell your information to businesses and creditors. Then you don’t get those pesky letters with credit offers. You can opt-out of letting all three reporting bureaus sell your information. The website to go to is: http://optoutprescreen.com

K: It’s a shame because we’re forced into this system. We have Big Brother taking all of our information, yet there’s very little education on it.

B: I think very few people understand how they can be proactive, like pulling your credit once a year and checking it even if you’re not buying a house or a car or anything. Even if you are not using credit you should be checking it once or twice a year just to make sure nobody’s pulling credit in your name and there are no errors. People don’t know which website to go to. It’s annual credit report.com. That’s the only place you can go to get a free credit report from each of the three bureaus, TransUnion, Equifax and Experian.

A big thank you to Blair Warner for the interview, I hope you find it valuable. If you need any help, reach out to Blair Warner, Upgrade My Credit, his number is 817-886-0302 ext. 3, or email: blair@upgrademycredit.com

In today’s environment of tighter lending standards, it’s more important than ever to handle money and credit intelligently and carefully. Although credit scores are not the only determining factor in deciding the credit-worthiness of a borrower, they are an important part of the process. Good credit scores can mean a lower interest rate, which can save you money on your monthly mortgage. Having a good score also gives you many more options in loan products when you start the home buying process.

As well as mortgages, having a good credit score benefits you and several other ways:

Auto Financing is better

Renting is easier

Job Prospects… yes, potential employers can check your credit score

Obtaining other Loans

Major purchases, like appliances or furniture

What is a FICO Score?

A credit score, simply put, asks and answers the basic question of whether or not a borrower pays their bills. It helps lenders determine if a borrower is likely to pose any type of credit risk.

A FICO® score [FICO® – Fair Issac Corporation] is a summary of an individual’s credit history from the three main credit bureaus: Equifax, Experian and TransUnion. Each bureau collects data differently, so an average of all three is considered a fair assessment of credit-worthiness. FICO® Scores are calculated based solely on information in consumer credit reports maintained at the credit reporting agencies.

There are other credit-reporting companies, but FICO® is the most widely used, as 90% of top lenders use FICO® Scores to determine whether an individual is a good credit risk.

Understanding Your FICO Score

In the US FICO® scores range from 300 to 850. The average score is around 660 to 670, and is considered good credit. 749 and up qualifies as excellent credit and scores below 620 are seen as less-than good credit.

What Makes Up a Credit Score?

35%: Payment History, including on time pays and delinquencies; more weight is placed on recent payment history.

30%: Remaining debt capacity

15%: Length of credit history

10%: Accumulation of debt in last 12 to 18 months; number of inquiries; opening dates

10%: Mix of Credit:
— Installment, revolving and open accounts
— Number of finance company loans; the more the lower the score

A logical first step in home buying is to check your credit report and see where you stand. If your credit needs a little primping, most lenders have programs to help you work on your credit. Sometimes, in cases where the damage is great, a hopeful borrower might want to work with a credit specialist. [we know a great one!]

Keeping good credit is valuable even if you aren’t in the market to buy a home at the moment. Your interest rates on a car or other installment loan, as well as on credit cards will be lower with a good credit score, saving more of your hard-earned dollars every month.

Credit Scores and Mortgages

The most influential determinant of your ability to get a mortgage is your credit score. The higher the score, the more mortage options are available and the lower the interest rate, generally. A credit score of 740 or higher qualifies for the best interest rates from most lenders. Although you often read that you can get a mortgage with a score of 620, it’s very difficult. The bottom credit score for most mortgages is 640. It’s always wise to get your credit score to a minimum of 660, so that if any last-minute dings happen to your score, you’re still well above the minimum.

Between a minimum 640 and a healthy 740, the rates can vary as much as 1 1/2 points. In today’s mortgage rate climate that can be the difference between 4% and 5.5%. Consider the difference in monthly payments on a $200,000 home:

4% rate = $954.83

5% rate = $1073.64

5 1/2% rate = $1,136

By taking the time to build a good credit score, you can end up saving as much as $181 each month. Over the 30 years of the loan that adds up to $65,160.

Extra Credit

OptOutPrescreen.com – Consumer credit reporting companies are allowed, under FAIR Isaac laws, to sell name lists to other companies that, in turn, make offers of credit or insurance. These “Firm Offers” aren’t initiated by you, the consumer. This website is the place where you can opt-out from firm offers, as well as opt-in.

Federal law allows you to get a free copy of your credit report every 12 months from each credit reporting company. One place to get your free reports is AnnualCreditReport.com. Credit counselors advise consumers to get one free report every 4 months from one credit reporting company. With identity theft on the rise, it’s always good to check for errors.

Do’s and Don’ts During the Loan Process

Between the time your offer on a home is ratified, becoming a contract, and the time you go to close on the home, this is the time your loan is in process. You should not do anything that will have an adverse affect on your credit score. What kind of things have an adverse effect? Glad you asked:

Don’t apply for new credit of any kind. No credit cards or lines of credit. No new car loans. None of that.

Don’t pay off collections or charge-offs, unless your lender asks you to. This is a hard one for people to accept. Generally, paying off old collections causes a drop in your credit score. When you do, it brings that particular account to the forefront of your credit. In most cases, the older a ding on your credit is, the less negative affect it has. In many cases, paying an old charge-off makes it new again.

Don’t close credit card accounts. If you close an account, it will affect your ratio of debt to available credit which has to be under a certain ratio. This accounts for 30% of your credit score. If you really want to close an account, do it after you close on your home.

Don’t max out or over charge existing credit cards. Running up your credit cards is the fastest way to bring your score down; it can drop up to 100 points overnight. You should try to keep your credit cards to below 30% of the available credit limit.

Don’t consolidate debt to one or two cards. Again, you don’t want to change your ratio of debt to available credit. You also want to keep your good credit history on the books.

Don’t raise red flags to the underwriter. Don’t co-sign on another person’s loan, or change your name or address. The less activity that occurs while your loan is in process… the better.

There are some things you should do while in the loan process:

Do join a credit watch program. Your bank, credit union or credit card company may be able to direct you to a free credit watch program that can alert you to any changes in your credit report. This way, if something pops up, you can intervene before an underwriter sees the problem.

Do continue to use your credit as you normally would. Red flags are easily raised within the scoring system. If it looks like you are changing from your normal spending patterns, it could possibly cause your score to go down. Example: if you’ve had a monthly service for internet access billed to the same credit card for the past 4 years, there’s really no reason to drop it now. Again, make your changes after the closing.

Do stay current on existing accounts. Late payments on your existing mortgage, car payment, or anything else that can be reported to a credit reporting agency can cost you dearly. One 30-day late payment can cost anywhere from 30 to 75 points on your credit score.

Do call your loan officer. If you receive notification from a collection agency or creditor that could potentially have an adverse affect on your credit score, call your Loan Officer so they can try to direct you to the right resources and prevent any negative reporting to the credit bureaus.

Keeping track of your credit score and understanding how it’s basically calculated can help you build a good score and maintain it. I recently attended a class with a lender and got some great information about credit scores. Here are my notes:

Credit Scores are made up of 5 sub-scores, which all need to be kept in good shape over time:

1. Payment History …………..35% Bills should be paid as agreed the most recent 6 months. The highest weight is put on the highest payments, mortgage, car payments, etc.

2. Balances Carried …………..30% Keep your balance to a ratio as low as possible. Outstanding balances should be less than 30% of the available credit. Over 50% is not so good. For example, if you have a credit card with a $3,000 limit, you shouldn’t have more than a $1,000 balance. Spread the balances between cards, don’t have all the balance on one card with the others at zero.

3. Credit History ………………15% The longer the credit history the better. Long credit history paid, as agreed has a positive impact on your credit score. So don’t close old accounts, especially if they have a long history, that has a negative impact on credit score.

4. Mix Of Accounts ……………10% It is ideal to have installment and revolving accounts. Mortgage loan, auto loan, 3 to 5 credit cards (more is ok, too), paid on time over 1 to 2 years. A HELOC should be greater than $40,000 or it will report as a revolving account versus a mortgage. (You don’t have to have them all at once, however. A mix of credit accounts over the years is ideal)

5. Inquiries ……………………..10% If you are applying for a mortgage, you are allowed a number of credit inquiries for 14 days, after that inquiries can cause you to lose points. Be aware that constantly applying for credit will cause a lower score. You are allowed to pull 1 credit report each year for your own knowledge, which is a good idea to keep aware of what is going on with your credit score.

Blemished credit can be costly, low credit scores mean higher interest rates. What can you do?

1. Check your own credit score. Mistakes are made, and finding them can save you. Everyone has the right by law to challenge mistakes on their credit report. Keeping track of your credit score is important to catch mistakes.

2. Pay past due accounts. Past due accounts can include those that are 1 day late. Past due accounts do not include judgements and collection accounts.

3. Get rid of late payments. Have them removed by phoning your creditor and requesting late payments be removed. You must be persistent and work your way up the ladder to someone who can help you. Always get a letter that documents: Name/address/account number, specific late payment to be removed, on company letterhead/signed by employee.

4. Get your credit card balances down, try getting credit limits increased. Every 6 months request an increase to your credit limit. Have the creditor base the increase on your credit history. However, if the creditor must pull credit, don’t, it will lower your credit score.

5. Start or keep making payments on time.

6. Do not close old accounts, this will hurt your score. Use old accounts periodically, charge a small amount and pay it off immediately. Don’t reply to pre-approved offers. Don’t consolidate.

7. Consider using the services of a professional credit counselor if you need extra help improving your credit score. We know just the person to help!

If you wonder if it’s worth the trouble, think about this: Increasing your credit score by 10 points will net interest savings of $100,000 over 30 years (on a $500,000 mortgage loan.)

Building A Credit Score

that lenders will love. If you plan to buy a house in the near future, or even in the not-so-near future, this short video is full of some great information that will set you on the right path to realizing your real estate goals.

First Time Buyers: How to Build a Credit Score That Lenders Will Love

Thanks to Blair Warner, Senior Credit Consultant of Upgrade My Credit for this informative video. Contact Blair Warner for further information and services. 817-886-0302. Blair can help buyers with their credit in all 50 states.

Building a good credit score is one of the first places to start for the first time buyer. There are good practices to building a credit score that will allow you to get the best interest rates, and allow you the greatest amount of choices and buying power.

The real estate industry has changed a lot over the last decade, and your credit score and credit history are an increasingly important part of home buying. There are several types of credit, and all have their purposes at different times.

If you’ve faced any unfortunate circumstances that have negatively affected your credit score, you may want to consider professional help. Credit repair, credit enhancement and education about maintaining good credit are all available and have proven to be a big help to home buyers.

If you are looking to purchase a home in Central Maryland, the Highland Group is here to help first time buyers navigate the waters of real estate. Ask us about Buyer Representation.

Eight Credit Score Myths

The following eight credit score myths are video segments of a conversation I had with my friend, Blair Warner, a Credit Counselor with Upgrade My Credit. The credit score is a very important component of the overall creditworthiness of a buyer, and demands attention.

Myth: “It will take years to increase my credit score”

Myth: Late Payments, How They Affect Your Credit Score

The responsible use of debt is the theme of the discussion about credit. Lenders need to know that a buyer is creditworthy and has used credit in a responsible manner. When you’re starting from zero, it will take about 2 or 3 years to build the kind of credit score that will allow you to get a loan and get it with a good rate.

For more questions, visit Blair Warner’s website, Upgrade My Credit. For professional services, a credit specialist can really make a difference.

Your Credit Score

In the following video, I discuss myths about your credit score with Blair Warner, credit repair coach at Upgrade My Credit, a company which specializes in helping people with credit score repair and enhancement:

Credit Score Myths

There are several short videos on the Frederick Real Estate YouTube channel with tips for establishing and maintaining a good credit score. If you find that you are in need of professional services, feel free to contact Blair Warner at Upgrade My Credit. Blair has helped some of our clients with their credit score problems, and is a great resource!

Maintain A Good Credit Score

Maintaining a good credit score (above 700) can mean not only that you qualify for a mortgage, but that you can qualify for lower interest rates. Lower interest rates mean lower monthly mortgage payments, not to mention lower car payments, lower rates on credit cards, etc.

Credit Repair After A Short Sale

Although a foreclosure will do three times the damage, as much as 300 points worth, a short sale can decrease your score between 50 and 100 points, on average.

The good news – recovering from the short sale is much quicker and much easier than recovering from a foreclosure. Depending on the circumstances, credit repair after a short sale can take as little time as a year.

If you are recovering from a diminished credit score due to a short sale, or because of any other financial hardship you’ve faced, this video interview has some great tips and information. Blair Warner, credit coach and founder of “Upgrade My Credit” was kind enough to answer some questions about the credit process.

Repairing your credit after a short sale is very possible. If you need professional service to help you repair your credit, consider contacting:

How To Improve Your Credit Score

Any time you check your credit score it’s like getting a snapshot at a particular time, when really, your score fluctuates up and down, based on your credit patterns. Most of the time, however, a credit score doesn’t change very much from month to month. Understanding what goes into a credit report will help you learn how to improve your credit score.
It’s a good idea to check your credit score periodically, about twice a year, and about 6 months before you buy a home. (You can get one free credit report per year from the top three, Experian, TransUnion, and Equifax.) Then if you find that your score needs improvement, you can take steps to improve your score, what is known as Credit Score Enhancement. By taking the correct steps, you can improve your credit score in 6 months.

Knowing How Your Score Works

Although credit scoring models differ among various credit scoring companies, they all break down to a basic formula:

1. 35% of your score is made up of your payment history.
2. 30% is made up of the amount owed.
3. 15% is made up of the length of credit history.
4. 10% is made up of new credit.
5. 10% is made up of the types of credit used.

Credit Score Enhancement

1. Pay your bills on time. Most scoring models take into account how late a payment is, how recently the late payment occurred, and how many late payments there are in total. Once you have a late payment, the damage is done. The negative impact of the late payment will dissipate with time, (it will stay on the report for 7 years) and late payments involving smaller amounts are not as significant as those with larger amounts. Managing your credit well over a period of time is the best thing you can do.

2. Limit outstanding debt. (30%). Most of the models take into consideration the ratio of the amount of debt to amount of credit. [debt/available credit] Ideally, you should keep that amount to 30% or lower. The higher the ratio, the more negative the score. Owing a lot of money on your accounts can indicate that you are over-extended. Having a small balance and making the minimum payment is the way to show that you use credit responsibly, and is actually better than having no balance at all. Check to make sure that your revolving accounts are reporting your credit; it does no good to have the credit if it is not being reported.

3. Preserve the length of your credit history. (15%). Don’t close unused accounts, because the length of your credit history is important. An insufficient credit history can have a negative effect on your score. Also, don’t open up new accounts rapidly, as this decreases the average age of your credit accounts, and it is considered risky behavior in most credit scoring models. It’s good to keep and occasionally use old credit cards to maintain a good score.

4. If you are considering buying a home in the next 6 months, avoid applying for new credit. Every time someone makes an inquiry into your credit, as when you open a new account, it negatively affects your score. (It doesn’t affect it if you look into your own credit.) You should always read the fine print in ‘special’ credit offers, and if you have any question about the legitimacy, don’t accept it. These solicitations are treated as ‘soft’ inquiries, which don’t affect your score; but when you accept the offer, it is treated as a ‘hard’ inquiry that is factored into the score. Definitely, don’t apply for a card you don’t think you are likely to get.

*When you are applying for a loan, the credit scoring companies generally allow multiple inquiries in a 14-day period. Inquiries from employers are not counted. Most of the time, for most people, one credit inquiry will result in less than five points being deducted from the score.

5. Manage the number and types of accounts you have. (10%) Someone who has a lot of credit accounts could possibly be considered a higher risk than someone who has only some credit card debt. The trick is to manage it wisely. Too many credit accounts can have a negative affect on your score. The ideal number of credit cards is usually considered to be 3 to 5. If you have an unreasonable amount of credit cards, you may want to consider closing some… but do it wisely. You could affect the ratio between credit limit and available credit previously mentioned that will reduce your score. You could also negatively affect the length of credit by closing older accounts.

Generallly, a mix of credit cards, retail accounts, installment loans and mortgage loans results in a better score, but all are not necessary. The lack of a mortgage, for instance, won’t negatively affect your score, but it will probably not be as high as it could be with one. You should not go out and open accounts that you don’t have in an effort to increase the types of accounts.

Good Credit can be 6 months away. If you have less than desirable credit scores, don’t lose hope, there are definite things you can do to enhance your credit scores. You can learn how to improve your credit score and keep it in good shape. If you start practicing these good credit management tips now, you’ll most likely be in much better shape in 6 months, which is really not a long time.

If you need extra help for Credit Repair, contact us for a referral to a reputable credit repair specialist.